FX saw a recovery in risk trade with both EURUSD and GBPUSD rising steadily through the night while USDJPY stalled at the 113.00 figure.

After yesterday massive selloff in cable triggered by the news that PM May delayed the Brexit deal vote in UK Parliament, today’s trading was much less volatile as sentiment improved steadily through the session.

News that US and Chinese negotiators had some productive discussions on trade, kicked things off in Asia with AUDUSD popping above the .7200 figure on hopes that some sort of deal could be worked out over the next several months.

The overnight data also proved supportive with UK labor release showing that wages rose at the quickest pace in a decade while unemployment hit a 41 year low. Meanwhile, in Europe the ZEW survey printed better than expected at -17.5 versus -25.0 eyed.

But data held little interest for the market as all eyes remain on the Brexit negotiations. PM May is scheduled to meet to Junker later in the day today trying to amend the Irish backstop terms which remains the key stumbling block in getting approval from Parliament. There is no doubt that Europeans want to avoid hard Brexit as much as the Brits given the massively negative ramifications for all involved, but the Europeans are not going to compromise on the sovereignty of the EU trading block and furthermore will be unlikely to offer any additional concessions unless May can assure them that the deal can pass.

With market sentiment so heavily skewed against cable and hint of progress in talks can trigger a short covering rally later in the day with longs trying to push the pair back through the 1.2700 figure which was formerly long-term support and will now be resistance. On the other hand, if Ms. May walks away empty-handed once again and all signs start pointing to the prospect of a hard Brexit pound could take out the 1.2500 figure in a flash as short resume their relentless selling.

In North America, the only data on the docket will be PPI release which is expected to come in sharply lower than the month prior and could only add to the thesis that Fed should halt hikes for now. USDJPY has stalled ahead of the 113.50 barrier and any cold PPI reading could drag it back below 113.00 at the start of North American trade.